How Climate Friendly is Your 401(k)?
Wednesday, September 21, 2022
As states like North Dakota debate whether to stay committed to fossil fuels, an online scorecard gives people with retirement accounts a glimpse into what role their investment portfolio plays in keeping the industry funded.
The nonprofit As You Sow is out with its latest Fossil Free Funds ratings.
Andrew Montes, director of digital strategy for As You Sow, said they grade investment firms based on which energy sources their funds are linked to. He added it might not be as obvious to most account holders.
"Just to use one from a major asset manager, from Vanguard, within the Vanguard 500 Index Fund, you're going to find investments in JPMorgan Chase," Montes explained. "JPMorgan Chase is the highest lender to fossil fuels over the last few years."
While some of Vanguard's funds get higher grades, a significant portion received "D" and "F" grades, including its most common plans. In the past year, fossil-fuel company stocks have netted returns, even in a down market. But some believe the gains are short-term.
Montes pointed out his group's view is not only do such investments contribute to the climate crisis, they could also become a more risky strategy as the world shifts to renewable energy.
"What is the world going to look like if you are, today, a 30-year-old working at a company, and you're thinking about 30 years down the road?" Montes posed. "Well, climate change has to be a major factor in what's going to impact your investments over that time."
Energy analysts have noted as costs for renewables like wind and solar go down, they are likely to see stronger investments. And as sources like coal see less demand, portfolios still wrapped up in such ventures could become stranded assets.
On its website, As You Sow has a toolkit with guidance on how to respond to fund managers maintaining significant investments in fossil fuels.
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